Crypto Finance is shifting billions thanks to a rally in bitcoin and other cryptocurrencies. CEO Jan Brzezek tells finews.com why major banks like UBS won't be able to avoid the boom much longer.
Jan Brzezek, after a long period of hesitation, it looks like UBS is helping wealthy clients with cryptocurrency investments. What does that mean for the crypto scene?
We at Crypto Finance naturally welcome this development, even though it really is a logical step. Private clients want to invest in digital assets and are often irritated when they can't do that at their bank. Blockchain technologies and digital assets are the future. Banks that are looking ahead are currently building new business models around them.
There was significant pressure coming from clients?
We know of ultra-high net worth clients who changed banks because of it. Also, competitors have started to move because of the rally in cryptocurrencies. Morgan Stanley announced a few weeks ago that it would offer cryptocurrencies as an investment theme by the way of funds – that is the first and easiest step towards a fuller crypto-offering.
What are the next steps?
Funds on digital assets are a very safe way for institutes to provide clients with exposure to cryptocurrencies from a compliance perspective. At the same time, banks are making sure that assets under management are not going to a specialized manager. That means that they can keep an overall perspective on a client's portfolio, which is important for the advisory side.
Offering cryptocurrency trading services quickly and easily with or through a qualified partner is the next potential step. The partner can also ensure the custody of the assets.
But doesn't that mean the bank is letting third parties handle the process?
That is nothing new. Only a few banks have their own share and bond trading units, or even direct exchange links and accounts.
«This wouldn't make any sense from a bank's perspective»
Having the banks implement a custody solution and administering it themselves would be the third and last step in a full offering. There are a number of specialized technology companies for that in Switzerland. There is nothing new in all of this. Banks contract specialized companies to build vaults in cellars. They don't employ welders to install steel walls. I really don't understand it when they say they have to do everything themselves around cryptocurrencies.
Crypto Finance offers digital assets investments through funds, a crypto brokerage and storage solutions for safe-keeping. Aren't you eating the banks' lunch?
Demand has risen significantly in the past few months, which is why we are in discussions with large Swiss institutes and foreign actors. The international crypto ecosystem is growing quickly. We are profiting from that because of Switzerland's prime position in the cryptocurrency field.
Are you talking to UBS? You had a career there and you probably still have connections.
We have a good relationship with UBS. It is, however, an international bank in contact with numerous parties in different countries related to any potential offering. A UBS partnership would be both realistic and powerful from the point of view that we are a specialized, regulated Swiss provider.
A large bank such as UBS could offer an entire crypto palette by itself. Aren't you scared that the establishment will eventually push you out of the market?
This wouldn't make any sense from a bank's perspective. The trend towards open banking means that the banks are becoming platform providers. They are the connection to the client and they provide the operating system. Like in an app store on your smartphone - you can offer clients hundreds of products and services from specialized third parties and fintechs.
«We don't need a banking license in the next few years»
There is little risk and it is a great deal cheaper than banks offering the service themselves. And if a client doesn't like it, you just change the service.
Switzerland has two crypto banks with Sygnum and Seba, Bitcoin Suisse withdrew its application for a banking license. Wouldn't you want one for Crypto Finance?
We received a securities license at the beginning of the year and we are supervised by Finma. It is an important pre-condition for our current and future services in the digital asset space. It is also evidence of our direction as a regulated and professional partner for financial institutes. That will be the future of this business. We don't need a banking license in the next few years – from my point of view. We are convinced that we can offer the best possible service to our banking clients.
How long will it be until crypto becomes a standard part of a bank's services?
Good things take time. Particularly in view of internal processes and banking information technology. Updates take several months. If you are not part of the current release, you have to wait for the next one. Our cooperation with banking software company Avaloq helps in that way in that our services are integrated, allowing for faster launches.
That sounds a bit vague...
I am convinced that for banks it is no longer a question of whether they can offer crypto. The only question is what services they will offer and what partner they choose. In the end, offering digital assets is simply an extension of the current product palette and services. As an example – besides a physical security deposit box they can also offer safe-keeping for digital assets in the future. This allows for a large bandwidth of new uses for the bank.
Jan Brzezek has been CEO of Crypto Finance since early 2017. Before that he worked in UBS' asset management, where he was involved with the implementation of new technologies at the group level. The brokerage business of the startup saw volumes of $1 billion in the first quarter of 2021, more than it had during the whole of 2020. Currently, it is the custodian of stored crypto assets worth 1.1 billion Swiss francs.
